Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, said on Thursday it would increase its capital spending by about 40% this year after reporting a sharp rise in quarterly profit driven by strong demand for artificial intelligence chips.

TSMC, a key supplier to companies including Nvidia and Apple, posted a net profit of 506 billion new Taiwan dollars ($16 billion) for the October–December quarter, up 35% from a year earlier and above market expectations.

Revenue in the quarter rose 21% year-on-year to 1.046 trillion new Taiwan dollars ($33 billion), the company said.

TSMC said it plans to raise its capital expenditure budget to between $52 billion and $56 billion in 2026, up from about $40 billion last year, as it ramps up investment to meet demand for advanced chipmaking technologies.

Shares in the company have risen more than 8% so far this year, reflecting its strong position in the AI-driven semiconductor market.

“We expect our business to be supported by continuous strong demand for our leading-edge process technologies,” Chief Financial Officer Wendell Huang said on a conference call, adding that capital spending would be “significantly higher” over the next three years.

Global technology companies including Microsoft, Meta Platforms and Alphabet have been sharply increasing investment in AI-related infrastructure, driving demand for advanced semiconductors.